It was a few decades ago when I cut my marketing teeth gathering around a table listening to marketing seminars at the University of Illinois Extension office. I could figure out my cost of production on a napkin at the local greasy spoon, but I needed to learn how to maximize my gross income.
I quickly realized successfully marketing my crop would be the most important hurdle to meeting my objectives of self-governing, debt free, not beholding to a banker, and eventually clip the financial coupons of success. Also important was that price volatility could be my friend, not my enemy.
Fast forward to today and it seems marketing has lost its importance. While a price of our commodities is discussed daily, there’s growing disinterest in market outlook. It seems to have been replaced crop insurance (RMA), as well as apathy by growers and even the banking community, which is more interested in making sure insurance covers the loan or even becomes a profit center.
Know When To Hold and When to Fold
The key is to know when to accept market risk (hold off selling for better opportunities). More importantly, know when to pass off risk (sell to someone else). Markets spend more time going down than up, so it pays to have a reliable price outlook knowing not only the fundamental value of a commodity but the overall market psychology; both influence “money flow” in or out of a commodity. Concentrating on cost rather than maximizing gross profit is folly. The market doesn’t care about your personal cost of production. It cares about relative value, what it is worth to the buyer and the fundamentals of supply and demand.
Supply/Demand
These fundamentals dictate if demand exceeds supply, price needs to rally to discourage usage. This is often called price rationing. The extent of a price rally is often influenced by its price elasticity (willingness to find a substitute) or inelasticity (need regardless of price). Conversely when supply exceeds demand, price will gravitate lower to encouraged demand or discourage production, or both.
The 20-year corn and soybean charts show price volatility. There are opportunities to profit from price appreciation. Or you can do nothing and be subject price deteriorating below cost of production. I’ve used the term “deer in the headlights” to describe broker/analysts who I felt didn’t see a bull market developing — as in the case of August 2024 — while also suggesting they won’t recognize the end of a bull market until it is in their rear view mirror. The charts show some key events price-wise were important key indicators and helped to mitigate risk.
First, note the significance of August over time. Corn posted significant August price events in 2006, 2010, 2014, 2020 and 2024. 2020 came after a six-year sideways, base building demand timeframe. More currently was 2024, the beginning of what I termed a “paradigm shift” in the way we would compete in global markets. During this period of 20 years, monthly prices were market by “gaps” in prices.
When prices gap higher on monthly basis tells me that fundamentally the market has changed and a new outlook has begun. To put it bluntly, buyers realized that markets were more bullish fundamentally than what was represented previously in monthly reports (WASDE), weather and global eco-political policies. This technical signal often leads the fundamentals blamed for the market move, well before fundamentals are known and attention is warranted.
Today’s Macro (Monthly) Outlook
While prices have rallied significantly since August 2024, recent price action suggests we are sailing in marketing-waters not seen in years.
Corn posted a monthly gap higher in September clearing all previous highs since August of 2023. This begs the question of why markets are paying more now at levels deemed unsustainable in the past three years. The fundamentals of supply and demand gives the answer. If yields are below 180 bu/ac nationally, carryout a year from now will be about 500 mil-bu than this past marketing year 2025/26; tight in anyone’s imagination. If yield is close to 176 bu or lower, price rationing is needed to curb demand.
Any yield below 52 is concerning supply wise. A 50 potentially requires more extreme price rationing with China getting to the point that it could become a price inflator should Brazil witness a supply reduction due to the Super El-Nino. Producers I have a relationship in Brazil are already concerned with fertilizer price and availability as profits threaten multi-decade lows.
A rising tide lifts all ships. The US has outperformed media pundits who have been negative for two years. The US being the economic giant, suggests globally there are benefits, with exception of Russia and China.
Food Security is gaining global traction. If supply gets tight, concerns grow. Even wheat may benefit as it is price inelastic. This is called price discovery. Few current media broker/advisors were around thirteen years ago. Social media has made market experts out of anyone who can write in a complete sentence. Forecasters were like deer in the headlights two years ago and odds favor not recognizing a top in process. It is when bears become bulls in mass that I get concerned. Someone has to be left to buy the top!
